If I’d invested £1,000 in Polymetal shares a year ago, here’s what I’d have today!

Dr James Fox explores whether investing in sanctions-hit Polymetal shares would have been worthwhile a year ago, just after the war in Ukraine began.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Chalkboard representation of risk versus reward on a pair of scales

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Polymetal (LSE:POLY) shares tanked when Russia invaded Ukraine in 2022. The gold mining stock has operations in Russia and Kazakhstan, and the former has just been hit by US sanctions — if business wasn’t tough enough already.

So what’s been going on with the share price, and what’s next for this gold miner?

A year of headwinds

Early on in the war, Polymetal highlighted challenges relating to funding as a result of sanctions placed on Russian banks — buyers of gold — and the state as a whole. At that point, the miner had not been sanctioned itself, but shares were trading for a fraction of where they had been pre-war.

A year ago, I knew of several investors who looked at this discounted stock and bought it. But if I’d invested £1,000 in the stock a year ago, today I’d have £790. That’s clearly not a good return on an investment.

It’s also worth highlighting that Polymetal stopped its dividend after the war — so I wouldn’t have received any dividends. Unfortunately for me, I owned Polymetal before the war.

Is there any upside?

Polymetal is a challenging company to value right now. For the year year ended 31 December, the gold miner reported a surge in operating costs due to the sanctions against Russia. Profits dropped and cash flow turned negative.

However, Polymetal noted that “disruption was largely eliminated in Q4 2022”, indicating that 2023 would likely be a better year, adding “the resumption of free cash flows and a reduction in net debt over the course of the coming year“.

It’s also worth noting that the Kazakh business is not impacted by the recent US sanctions. In 2022, its operations in Kazakhstan delivered around 500,000 oz of gold, versus 1.2m oz in Russia.

Delisting

Shareholders have been hit with more uncertainty. Polymetal plans to leave the London Stock Exchange on 17 July — subject to a shareholder vote next week. The Anglo-Russian gold and silver producer plans to move its primary listing to the Astana Stock Exchange (AIX).

This could be a challenge. That’s because if I still owned the shares, it wouldn’t be easy for me to access them — buying or selling — on the AIX. Unsurprisingly, my brokerage doesn’t provide me with access to Kazakh-listed stocks.

My verdict

I’d suggest that Polymetal could be undervalued, but that’s very hard to accurately assess right now. But the guidance is positive and, as mentioned, around 30% of its operations are not impacted by sanctions.

However, I’m not sure it’s worth the risk or the hassle. Assuming the delisting goes ahead, I’d have to find a broker to allow me to trade these stocks, and there’s always the risk that things could get worse. Maybe Moscow will nationalise the company — I wouldn’t bet against it as the war drags on.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

£20,000 in savings? Here’s how I’d aim for £14,710 a year in passive income

With spare savings, this Fool would start generating passive income for a more comfortable retirement. Here he details how he'd…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,000 in savings? Here’s how I’d try to turn that into £581 a month of passive income

Relatively small investments in high-yielding stocks can grow through the power of dividend compounding into significant passive income.

Read more »

Photo of a man going through financial problems
Investing Articles

These are the FTSE’s biggest dogs over the last year!

The FTSE 100 has fallen far behind other major market indices over the past 12 months. However, these three sliding…

Read more »

Investing Articles

My top 3 stock market lessons from the Nvidia volcano eruption

Can we learn anything from the explosive rise in Nvidia's share price? Here are three Foolish reflections from this stock…

Read more »

Abstract 3d arrows with rocket
Investing Articles

Is boohoo the best near-penny stock to buy today?

This Fool asks why the boohoo share price has collapsed and whether now might be a good time to invest…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »